Member States of the Eurasian Economic Union Concerned Over Anti-Russian Sanctions of the USA

The confrontation between Russia and the West has had a negative impact on the closest partners of Moscow that share in the trade and economic market with Russia. Thus, the member states of the Eurasian Economic Union (EAEU), including Russia, Belorussia, Kazakhstan, Armenia and Kyrgyzstan, have been concerned over the new law on sanctions against Russia, Iran and North Korea signed by U.S. President Donald Trump (www.whitehouse.gov, August 02).

President of Kazakhstan Nursultan Nazarbayev during the working meeting with Prime Minister Bakytzhan Sagintayev emphasized that a new wave of U.S. sanctions against Russia may have impact on the economy of Kazakhstan. “I address everyone, before the year is out; we have to work hard to finish the year in an orderly way. There is a substantial risk. There are price fluctuations for our energy carriers and raw materials. It might be the influence of sanctions against Russia. That fact must be taken into account,” Nazarbayev said (http://www.akorda.kz, August 07).

It should be emphasized that a new package of U.S. economic sanctions against Russia is the response of the U.S. to the Russian interference into the American presidential elections, annexation of Crimea, and the support of armed separatists in eastern Ukraine. The package imposes restrictions on Russian energy companies such as Gazprom, Rosneft, Lukoil, which are actively operating in Central Asian states. The U.S. president may not curtail or lift sanctions without congressional approval.

The market of Kazakhstan has responded nervously to the new list of sanctions. In early August, the national currency of Kazakhstan depreciated by 15 points against the U.S. dollar, i.e. the Kazakh tenge depreciated by 3.5%. If before the American sanctions, one USD was equal to KZT 334.5, after August 2, the USD exchange rate jumped as high as KZT 343. The currency market of Kazakhstan faced the devaluation with hysteria and panic. In this regard, the National Bank of Kazakhstan had to make an official statement where it condemned the speculative actions of some commercial banks and called on the population to stay calm. However, the National Bank honestly claimed that “the current dynamics of the tenge rate is explained first by the expected negative impact of additional sanctions of the USA against the Russian Federation, the uncertain further development of the situation, as well as the respective dynamics of the Russian ruble. Certain speculative comments in the media fuel the panic buying of US dollars” (www.zakon.kz, August 2).

Such explanations by the national bank of the country expectedly caused the discontent of the Kazakh society about the dependence of the tenge rate on the fluctuations in the Russian ruble and the ups and downs of the Kremlin’s foreign policy. Due to the increased volatility of the tenge to dollar rate in the domestic currency market, the National Bank of Kazakhstan has decided to decrease the reference rate to 10.25% (www.nationalbank.kz, August 21).

After the introduction of anti-Russian sanctions, the markets of other member states of EAEU – Belorussia and Kyrgyzstan – have faced reduced economic performance and a nervous environment in the financial sector. The American sanctions against Russia have already had a negative impact on the economy of Belorussia, which is closely connected with the Russian market. In particular, restrictive measures have affected the performance of Belorussian banks, many of which are the subsidiaries to the Russian banks. According to Alpari Forex Broker analyst Vadim Iosub, “U.S. sanctions have shortened the period of loans granted to Russian banks. Now these banks may not attract long-terms loans on western markets. Respectively, the subsidiaries of these banks in Belorussia will need to adjust their plans” (www.naviny.by, July 29).

The U.S. sanctions against Russia have the same negative impact on the Kyrgyz economy, too. In the interview with the Kyrgyz analyst, Arslan Kapai, he said, “in the long term, the anti-Russian sanctions may damage the economic growth rate of Kyrgyzstan given that Moscow is a key trade and economic and investment partner of Bishkek.” Therefore, it should be noted that Kyrgyzstan remains the most vulnerable and poor state among other EAEU members. The Eurasian Economic Union is known to be established at the initiative of Russia and it is the main instrument to get the states of former USSR back under the influence of Moscow. It is the political and economic dependence on the Kremlin that has forced President of Kyrgyzstan Almazbek Atambayev to sign the Agreement on the Eurasian Economic Union (www.eaeunion.org, August 12, 2015).

It should be noted that after Atambayev came to power, he not only bound the Kyrgyz economy to the financial system of Russia, but he was also actively pursuing an anti-American policy for 7 years. Based on the “recommendation” of the Kremlin, he forced the US airbase to leave Kyrgyzstan that participated in the Operation Enduring Freedom – Afghanistan against the international terrorism. (www.ria.ru, June 03, 2014).

One year later Atambayev defiantly denounced the Agreement Between the Governments of the United States of America and the Government of the Kyrgyz Republic Regarding Cooperation, which was the basis of the bilateral cooperation (www.24.kg, July 21, 2015). And this summer the Kyrgyz president blamed the Government of the United States for pushing Uzbekistan for the conflict with Kyrgyzstan. He claimed he had no warm sentiments about the policy pursued by the U.S. State Department run by Democrats. Atambayev openly blamed the United States for the interventions into his national affairs reminding that Americans “actually pushed for, encouraged the conflict between the two fraternal peoples – the Kyrgyz and the Uzbeks” (www.sputnik.kg, July 24, 2017).

The result of the unilateral pro-Russian policy of the Atambayev’s Government was full dependence of the Kyrgyz national economy on the Russian economy. In 2013, the strategic gas industry of the republic was sold just for $1 to the Russian Gazprom, which is now under the Western sanctions (www.fergananews.com, July 29, 2013). Oil products and fuel and lubricants are 100% imported to Kyrgyzstan from Russia, where the main supplier is Rosneft, which is also under the sanction imposed by the Government of the United States. After the accession to the Eurasian Economic Union, Kyrgyzstan has lost its transit corridor for the transit of the Chinese goods to other CIS states, which brought multimillion profit to the public treasury. According to Minister of Finance Adylbek Kasymaliev, as a result, the government debt of Kyrgyzstan is $4 billion 243 million, which is approximately the annual budget of the country (www.azattyk.org, July 22, 2017). After the accession to the EAEU, no particular breakthroughs in the development of the industrial production have occurred, as was promised by Atambayev. All these indicators show that the economy of Kyrgyzstan may suffer from the anti-Russian sanctions more than others.

Armenia, a member to EAEU since January 2015, is seriously concerned over the new package of American sanctions against Russia. The Armenian Minister of Finance, Vardan Aramyan, noted that “American sanctions against Russia and Iran will damage the economy of Armenia” (www.regnum.ru, August 5, 2015). This concern is caused by the fact that the new sanctions of the United States are mainly against the Russian oil and gas sector. Today the Russian Gazprom fully provides Armenia and Kyrgyzstan with natural gas. Due to the sanctions, Gazprom may raise the natural gas prices for Armenia and Kyrgyzstan. This can lead to the growing prices of electricity, food and oil products, which will cause a wave of discontent.

Migrant workers from Central Asia and Caucasus working in Russia are also seriously concerned about the anti-Russian sanctions imposed by the United States. In particular, the authorities of Uzbekistan, Tajikistan, Turkmenistan, Kazakhstan, Kyrgyzstan, Armenia and Azerbaijan expect the massive return of their citizens from Russia, if sanctions lead to certain job cuts in Russia. According to the Main Directorate for Migration Affairs of the Ministry of Internal Affairs of Russia, today about half a million citizens of Armenia, 600,000 citizens of Azerbaijan, over 2 million citizens of Uzbekistan, over 2 million citizens of Ukraine, one million citizens of Tajikistan and Kyrgyzstan, 500,000 citizens of Kazakhstan work in Russia. Deterioration in the economic situation in Russia may reduce the amount of money transferred by migrants to their homeland. Today transfers from Russia constitute the major part of all transfers to Armenia, Uzbekistan, Kyrgyzstan and Tajikistan. For example, last year Kyrgyz migrants in Russia transferred $2.4 billion home, which is one half of the national GDP. A possible reduction of money transfers from Russia and a massive return of Kyrgyz migrant workers back home may lead to another color revolution in Kyrgyzstan.

Thus, the inclusion of Russia into the list of rogue states along with Iran and North Korea has expectedly caused concern of the political leaders of post-Soviet countries that have Moscow as their main trade and economic partner. It has become obvious that Russia cannot symmetrically respond to the American sanctions. Instead, the Kremlin applies its favorite method of causing anti-American mood in the authoritarian leaders and residents of CIS.

However, the anti-Russian sanctions of the West may give a good chance to Central Asian and Caucasian states to reduce the imperial influence of Moscow on their national economies. “The current American sanctions package is a step toward removing Russia from the world globalization process,” outstanding political expert Lilia Shevtsova concluded (www.svoboda.org, August 1, 2017). It remains to be seen whether the CIS states will use this opportunity.

What Remains of the Relationship between Russia and the European Union

On Friday November 9, 2018, Chancellor of Austria Sebastian Kurz made a statement about the detention of a retired Austrian officer on suspicion of spying for Russia. Minister of Foreign Affairs of Austria Karin Kneissl cancelled her December visit to Russia. That very same day, the Ambassador of the Republic of Austria to Russia, Johannes Aigner, was summoned to the Ministry of Foreign Affairs of the Russian Federation. Journalists expressed concern that the situation would have an impact on the development of relations between Russia and Austria and further effect the EU–Russia relationship. Minister of Foreign Affairs Sergey Lavrov expressed his regret that the West was increasingly turning to “microphone and megaphone diplomacy” instead of turning to Russia directly for clarification, which has always been the case in international relations.

The fallout from this incident will only become clear later. It is unlikely that it will result in any serious consequences, for example, a new round of sanctions or a sharp deterioration in relations. At the very least, Friday’s events did not affect the development of interaction at the level of track one and a half diplomacy. On Monday November 12, the Russian International Affairs Council (RIAC) hosted a seminar entitled “EU–Russian Relations in the Context of the Republic of Austria’s Presidency of the Council of the European Union.” The meeting was organized by RIAC in conjunction with the Embassy of the Republic of Austria in Russia and the European Union Delegation to the Russian Federation. It was attended by Deputy Minister of Foreign Affairs of the Russian Federation Alexander Grushko, Ambassador of the Republic of Austria to Russia Johannes Aigner and the Head of the European Union Delegation to the Russian Federation Markus Ederer. Participants included ambassadors of EU countries and Russian experts on EU–Russia relations. During the closed-door discussion, the ambassadors and experts talked about factors influencing the development of bilateral relations between Russia and Austria, and between Russia and the European Union, and outlined a number of development trends. It is important to note here that Friday’s incident was not brought up or discussed at the meeting.

Austrian Presidency of the Council of the European Union

Presidency of the Council of the European Union changes hands among EU member countries on a rotating basis every six months. During the six-month presidency, the country chairs meetings of the Council at all levels, ensuring consistency of the European Union’s work within the Council. To this end, the European Union employs a mechanism of a “trio presidency,” or simply Trio. Trios set long-term goals and draw up a common agenda on the main issues to be considered by the Council over the course of the next 18 months. Each country then prepares a more detailed programme on the basis of this agenda for their respective six-month terms. Presidency of the Council of the European Union entails, first and foremost, supervising the Council’s work on the development of EU legislation. The president country chairs meetings of the Council’s various structures, with the exception of the Foreign Affairs Council. However, it does work in close cooperation with the High Representative of the Union for Foreign Affairs and Security Policy and supports its work.

Austria took over presidency of the Council of Europe for the second half of 2018, being part of the trio that includes Estonia and Bulgaria. Contacts between the Ministry of Foreign Affairs of the Russian Federation and the European External Action Service have been adequately maintained during the Republic of Austria’s presidency. Dmitry Medvedev has met with Jean-Claude Juncker, Sergey Lavrov has met with Federica Mogherini and regular working meetings and expert discussions have taken place. Indeed, Russia has a special relationship with Austria. Throughout the crisis, Austria has been a bridge between Russia and the European Union, maintaining an objective and loyal attitude towards the country and not succumbing to the general hysteria sweeping the continent. Austria has always believed that it is important to preserve communication channels with Moscow. For example, Austria did not follow the lead of other Western countries that expelled Russian diplomats in a display of solidarity with the United Kingdom following the Skripal case. In the context of the crisis in EU–Russia relations, it is in the interests of both sides to have a neutral mediator. We have to hope that Austria will continue to fulfil that role.

Islands of Cooperation between Russia and the EU

The discussion at the seminar once again demonstrated that Ukraine remains a sticking point in EU–Russia relations. Moscow and Brussels differ in their opinions on the reasons for the crisis in their relations, as well as on the reasons for the Ukrainian crisis and current events around it. As far as the European Union is concerned, the crisis has been primarily caused by Russia’s policy towards Ukraine. Russia, meanwhile, believes that the causes of the crisis had been simmering long before the events in Ukraine, owing to the accumulated problems between Russia and the West. Key among these problems, according to Russia, is the eastward expansion of NATO in total disregard of Russia’s security interests. Moscow regards the events in Ukraine in 2014 as a coup d’état that threatens the Russian-speaking population and ethnic Russians living in Ukraine, while the European Union sees them as a popular protest against the regime. Both Russia and the European Union call for the resolution of the Ukrainian crisis and the implementation of the Minsk agreements. However, the approaches of the two sides are irreconcilable. Russia believes that Kiev’s policies are blocking the implementation of the Minsk agreements. The European Union sees otherwise, blaming Russia’s policies for impeding the proper fulfilment of the agreements. Russia does not even see itself as a party to the conflict. Moscow is in favour of improving relations with the European Union, as it believes that further deterioration is not in the interests of any of the parties. For the European Union, improving relations involves changing Russia’s policies.

Despite the deep crisis in EU–Russia relations, there do exist certain “islands of cooperation.” First and foremost, humanitarian cooperation remains one of the few areas of regular interaction between the two sides. This includes cooperation in science, culture, education and academic exchanges. Liberalizing the visa regime would contribute to greater mobility and success in this area, but it is highly unlikely in the foreseeable future given the current political climate.

When states experience difficulties in their official relations, non-governmental channels are often used to maintain a dialogue – non-profit organizations, analytical centres, contacts among academic institutions and scientists, expert dialogues, etc. The political situation could very well change at some point in the future, which is why it makes sense now to work out a strategy for cooperation if and when that does happen, at least at the expert level.

Russian experts and members of the political community support the idea of cooperation between the European Union and the Eurasian Economic Union (EAEU), seeing it as a niche area of interaction with the participation of Russia and the European Union. However, European experts and EU officials have expressed their concerns that the EAEU is not a purely economic integration association. In particular, many European experts see the creation of the EAEU as an attempt to restore Russian influence in the post-Soviet space. At the political level, the reaction is more restrained. The Global Strategy for the Foreign and Security Policy of the European Union states that the European Union supports regional integration and is prepared to cooperate with regional associations. However, the Eurasian Economic Union is not named as one of those associations. EU officials complain that the interests and positions of the EAEU member countries are not aligned, which makes it difficult to cooperate with it as an association. At the same time, attempts have been made to cooperate with the Eurasian Economic Union at the technical level. It is probably best in this situation to work out issues of interaction at the level of track one and a half diplomacy beforehand, involving representatives from interested EU and EAEU countries in the process.

Russia and the European Union have common interests with regard to China. In particular, many experts believe that both players could take a more proactive stance on China’s Belt and Road Initiative to strengthen connectivity in the Eurasian region. Cooperation could be built in the format of the European Union, Russia, the Eurasian Economic Union, China and Central Asian states.

Of course, this set of initiatives is not enough for a full-fledged cooperation agenda, but it is a niche for interaction during the crisis in the relations between Russia and the West. Limited interaction between Russia and the European Union is evident against the background of a rapidly changing world, the growing threat of terrorism and extremism, the conflict in the Middle East, the technological revolution in the military sphere, the growing threats in cyberspace and the significant changes in the foreign policy of the United States under the Donald Trump administration, which has seen the country increasingly becoming a factor of instability and unpredictability in global politics. It is in the interests of both Russia and the European Union to come together to resolve these issues, as well as many others, in a coordinated fashion.

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On Russia’s Power: is Winter Coming?

On November 11–12, 2018, Abu Dhabi hosted the fifth annual expert meeting within the strategic dialog organized by Emirates Policy Center with the support of the UAE Ministry of Foreign Affairs. Traditionally the event gathers a large number of specialists in international relations, regional security, and Middle Eastern issues. Andrey Kortunov, RIAC Director General, made a speech at the session devoted to the role of Russia in the modern world, including in the Middle East.

Talking about Russia’s power in the Middle East or in a broader global context, we should probably start with defining what power in the contemporary world politics really means. Is it about material resources that a nation can mobilize to shoulder its foreign policy aspirations — the total throw-weight of strategic missiles, the number of aircraft carriers and combined budgets of national assistance agencies? Is it about the size of your territory or about the natural resources that the territory contains? Is it rather about you GNP or about GNP per capita that defines your power in international relations? Probably not. If you happen to be an eight-hundred-pound gorilla in the jungle, this does not necessarily make you the strongest beast around. A lot depends on how functional these eight hundred pounds are. It may be pure muscle tissue, but it may also be accumulated belly fat.

There is another, more functional definition of power in world politics. Power is defined as ability of states or non-state actors to make other actors do certain things or abstain from doing some things in the interests of those exercising power. To put it in a broader context, you can define power as ability of actors to meet the goals they set for themselves in international relations.

From this vantage point, Russia has recently demonstrated that it is a powerful state, capable of using its power in an efficient way. No matter how we assess the Russian role in the contemporary international system — as a predominantly positive or a predominantly negative, — we should agree that Russia constantly punches above its weight, having more impact on the system that it theoretically should have according to its ‘objective’ economic, technological or demographic potential.

If I were to compare Russia to a large investment fund, I would venture to say that the price of its stocks today is significantly higher than the true value of its assets. Look, for instance, at the recent Russia’s posture in the Middle East region. In my view, we can label it as an exceptionally successful political start-up: with rather modest price paid in blood in treasure, Moscow has been able to turn itself from a marginal player in the region into the arguably most important external power broker.

This apparent gap between the operational power and its material foundation needs an explanation. To say that Vladimir Putin has been simply lucky, making full use of indecisiveness and inconsistencies of the West and exploiting many vacuums of power around the globe is to say nothing. There should be something here about the ability of the Kremlin to make fast and resolute decisions, about its capacity to promptly mobilize Russia’s political and military forces, about the quality of the Russian diplomacy and so on.

Russia’s highly centralized political system, impressive domestic and international state propaganda machinery, its consistency in supporting Moscow’s allies and partners — all these features of the ‘Putin’s style’ foreign policy puts Russia in a league of its own in world politics. It does not have many important features of a truly great power (above all, it lacks a solid and diverse economic foundation), but so far it has been able to capitalize exactly on what distinguishes it from a ‘standard’ Western democracy or a typical non-Western autocracy. In other words, Russia is powerful because Russia is different.

Nevertheless, the Russian way of maximizing its international power contains a number of risks that should not be underestimated. First, the set of instruments, which the Kremlin can use in international relations to advance its goals, is quite limited. Russia is a nuclear superpower, is has military power projection capabilities second only to the United States. It is a global leader in cyber warfare and in a number of futuristic weapons. It is a permanent member of the UN Security Council with a veto power, which it never hesitates to use. It is a member of other international groupings — ranging from G20 and APEC to SCO and BRICS. It is a global supplier of hydrocarbons, many other commodities, as well as of food stock. It is the largest country in the world with eleven time zones.

However, is this set enough for Russia to maintain its status in global politics for all of the XXI century? Until 2050? Until 2030? Probably, not. If so, in the rapidly changing international environment the Kremlin has to consider seriously a significant diversification of its foreign policy instruments with a special emphasis on soft power components (culture, education, social practices, technological edge, science and so on). The sooner we start moving in this direction, the more secure the country’s role is likely to be in the long-term future.

Second, many of current Russia’s foreign policy investments are high-risk investments bordering political speculations. Should Russia continue betting of leftist political regimens in Venezuela or in Nicaragua? Should it bet on Euro-sceptics and right wing populists in the European Union? Should it invest into failing autocracies in Africa? This opportunistic globalism is distracting Moscow from what is truly important for Russia: from resolving multiple crises on the territory of the former Soviet Union, from building stable partnerships with its immediate neighbors, from gradually restoring the troubled relationship with the West.

As for targets of opportunity overseas, any political engagement should be preceded, not followed by a careful consideration of exit strategy options. History teaches us repeatedly: countries that can win wars, quite often lose peace. If you take the ongoing conflict in Syria, it will not last forever. When the name of the game is no longer military operations, but a post-conflict reconstruction, new players will come to the stage, no matter who is charge in Damascus. External powers with deeper pockets than those that Russia has will claim a central role in the post-war Syria. The Kremlin should try very hard to convert its current military successes into less explicit, but a more lasting and a more stable political presence in the country.

Finally, neither Russia, not any other nation should forget that the real foreign policy power comes from the inside. Foreign policy victories might look great and they definitely appeal to the public, but they never become an adequate substitute for victories at home. In the end of the day, the ability to balance economic growth and social equity, preserving national identity and integration into the global community, political representation and efficient governance constitute the only reliable foundation for power in international relations. All other foundations turn out to be quite shaky and fragile.

I have no doubts that Russia has all needed ingredients to stay as a great power, no a global spoiler. It has the potential that makes it capable of being not a part of the problem, but a part of the solution for the international system of the XXI century.

However, the future of Russia’s power and that of Russia’s role will depend on the overall evolution of the system. In a popular American fantasy television series “The Game of Thrones”, characters from time to time remind each other — “Winter is coming”. By “Winter” (with a capital “W”) they mean something really bad, big and unavoidable looming on the horizon. They cannot prevent the Winter, so they have to learn who to survive in this extremely hostile and dangerous environment.

Today, there are many indicators that “Winter” might be the future of the world politics in years to come, that what we observe today is not a bad weather, but a profound climate change. The implosion of the state system in parts of the Middle East, the rise of right populism and nationalism in Europe, Brexit in UK the election of Trump in US, the coming collapse of the US — Russian strategic arms control, a renewed arms race in Asia — there are multiple symptoms of hard times ahead of us.

If the name of the game in the global politics is likely to be security, not development, if the prime goal of nations is going to be survival rather than prosperity, why should Russia change its current understanding of power in international relations? In a way, the Kremlin is better prepared to face the global Winter than most of its competitors and opponents are. To create incentives for the Russian foreign policy to reinvent itself, one has to prove that the global Winter is not the only option. Otherwise the world might face a self-fulfilling prophesy. As they say, “fate is shaped half by expectation, half by inattention.”

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Russia and Comoro Islands Cooperate To Enhance Bilateral Relations

On November 8-10, Minister of Foreign Affairs and International Cooperation of the Comoro Islands, El-Amine Souef, paid his first official working visit to Moscow. Foreign Minister Sergey Lavrov held talks with him on November 9.

After the talks, Lavrov told the media conference that they had confirmed to continue promoting bilateral cooperation in many spheres and work together towards using the existing potential in both countries.

There is considerable potential for cooperation in fishing, renewable energy, the provision of fresh water and agriculture.

“We have agreed to help our business communities establish direct ties and we also exchanged opinions on international issues, reaffirming the identity or similarity of our views,” Lavrov said.

They exchanged of views on international and regional issues of mutual interest with an emphasis on preventing and defusing crises in Africa and the Middle East, struggling against piracy in the northwestern part of the Indian Ocean and countering terrorism and extremism.

Lavrov reminded that Moscow firmly supports the principle formulated by the African countries, that is “African solutions to African problems” and urged Africans to find ways of settling conflicts while the international community provides the necessary assistance through the African Union and sub-regional African organisations with the coordinating role of the UN.

Under a memorandum signed by the ministers, Russia will be training law enforcement personnel for the Comoro Islands.

Kelvin Dewey Stubborn, South African based Senior Analyst on BRICS and African policy, observes that foreign assistance is very essential to transform the economy and improve living standards of the population on the Comoro Islands.

Thus, Russia’s economic engagement is needed at this time, most importantly, to maintain stability and turn around the opportunities into an attractive place. With a relatively small investment, Russia could achieve important results for the Islands, so the first step should be genuine commitment, he told me in an emailed interview from Johannesburg.

One of the world’s poorest and smallest economies, the Islands are hampered by inadequate transportation links. It has a rapidly increasing population and few natural resources.

The low educational level of the labour force contributes to a subsistence level of economic activity and a heavy dependence on foreign grants and technical assistance. France, the colonial power, still remains a key trading partner and bilateral donor.

Russia established diplomatic relations with the Comoro Islands after it gained independence from France on 6 July 1975. In mid-2017, Comoros joined the Southern African Development Community with 15 other regional member states.

The most common language is Shikomoro, a Swahili dialect. French and Arabic are also widely spoken. About 57% of the population is literate. The Islands, with a population of about 1.2 million, situated off the southeast coast of Africa, to the east is Mozambique and northwest is Madagascar in the Indian Ocean.